Accounts Receivable Factoring

How to Get Your Clients Financing When Banks Have Stopped Lending

One of the biggest challenges that owners of small and mid-size businesses have is waiting 30 to 60 days to get paid on their invoices.

While large businesses can usually afford to wait, small and mid-size businesses often can not. As a matter of fact, waiting to get paid on their invoices, usually effects managements' ability to meet payroll or meet other company obligations. This can be even more frustrating if the business has a number of orders that it cannot fill because cash is tied in unpaid invoices.

How can factoring help your clients?
Invoice factoring, also known as accounts receivable factoring, is a financial tool that allows companies to capitalize on the power of their slow paying invoices. It enables them to convert their invoices into immediate cash, allowing them to fund their business operations. Invoices from strong credit-worthy commercial clients are excellent collateral, especially to factors. Although most banks aren't interested in accounts receivable - invoice factoring companies are focused on providing financing based upon them. This makes it an ideal financing vehicle for small and mid size businesses.

How does factoring work?
As opposed to most banks that lend against collateral, invoice factoring companies buy invoices (the collateral) outright. The factoring company that buys invoices provides funds immediately, while they wait to get paid by your client’s customers.

Perhaps this transaction is best described with an example:
1. Assume that your client sells products/services to Company A and Company B. As soon as they provide their services, they issue invoices.


2. At the same time, your client sends copies of the invoices to the factoring company, who purchases them and provides an advance payment for them.

3. The factoring company waits to get paid by your client’s customers.. Once paid, any remaining funds are sent back to the company.

The invoice factoring process can be repeated for every invoice issued, providing a flexible line of financing that grows with the business.